Banks have refer 25 companies on the RBI’s second list to NCLT

Lenders have decided to refer 25 of 28 companies on the Reserve Bank of India’s second list of large corporate defaulters to the National Company Law Tribunal (NCLT) for initiation of insolvency proceedings.

Among the 28 companies are Videocon Industries, Anrak Aluminium and Jayaswal Neco Industries, companies where bankers had sought an extension in deadline to finalize a resolution plan.

These 28 companies are on RBI’s second list of defaulters sent to banks in late August.

The central bank directed banks to finalize resolution plans for them by 13 December, failing which they had to refer them to NCLT by December end.

The central bank, in its letter to banks, clarified it has not extended the 13 December deadline to favour a few cases, according to three people with knowledge of the matter. Mint has not reviewed the letter.

RBI sent its first list of 12 large defaulters to banks in June. Its second list of troubled firms accounts for Rs2 trillion in bad loans.

To be sure, petitions under the Insolvency and Bankruptcy Code have been filed against some companies on the list such as Ruchi Soya, Nagarjuna Oil, IVRCL, Orchid Pharma and Castex Technologies.

Accordingly, a total of 25 cases will undergo insolvency proceedings, according to the people cited above who did not want to be identified. In the case of Videocon Industries, consortium leader State Bank of India (SBI) was awaiting a rating before finalizing a resolution plan.

Venugopal Dhoot, chairman and managing director of Videocon, said the total debt of Videocon Industries and Videocon Telecommunications that will be referred to NCLT stands at Rs22,000 crore.

“Considering the strong brand portfolio, large manufacturing base and very wide distribution network, we feel the business is very valuable and will fetch good valuation for lenders,” Dhoot said.

In the case of Anrak Aluminium, lenders were looking at a one-time settlement, which has been rejected by the regulator.

Jaiprakash Associates, BILT Graphic Paper Products Ltd and Soma Enterprises are the only companies where banks have finalized a resolution outside NCLT.

In the case of Jaiprakash Associates, lead banker ICICI Bank Ltd has been in talks with promoters to sell assets and repay debt. The plan involves deep restructuring of the account. Stand-alone debt of the company stood at Rs25,587 crore as of end March.

In these three cases, while RBI has given its go-ahead to a resolution plan, its approval is conditional on lenders meeting certain requirements before 31 December, said one of the three people cited above.

“The decision to not extend the deadline shows the firm stance of the regulator to resolve the distress in the system. But one has to watch how the timelines are met. First, we will have to watch out for the timelines because IBC cases in RBI’s first list are struggling to meet the 180-day deadline and have sought approval for an additional 90 days to finalize resolution plans. Second, the IBC ordinance has shrunk the pool of resolution applicants, and this could prove challenging in resolving cases in the second list,” said Aashit Shah, partner at law firm J. Sagar Associates.